Is Government Too Zealous in Pursuing Money Laundering?

Although a federal court jury convicted the five major defendants in the massive money laundering trial known as the “Jewelry Mart case,” defense lawyers have raised questions about the breadth of the prosecution.

The recently concluded trial stemmed from “Operation Polar Cap,” the nation’s largest money laundering investigation, which centered on the downtown Los Angeles jewelry district.

It began in February, 1989, when federal agents swept through the district, arresting 33.

The government had conducted extensive wiretaps and video surveillances of several jewelry companies, which indicated that owners and employees were allegedly involved in laundering millions of dollars in drug proceeds under the guise of gold bullion transactions.

Prosecutors split the case in two. Seventeen individuals and one company were indicted on charges of laundering $350 million in one case and the rest are awaiting trial in a second.

By the time the first case ended, nine of the 17 indicted were freed. The government dismissed charges against four before the trial started. U.S. District Judge William D. Keller threw out charges against one after the prosecution concluded its case and a jury acquitted four defendants.

Three individuals and the company pleaded guilty before trial and the jury convicted five individuals, whom prosecutors called the major defendants.

Nonetheless, there has been no other major federal drug case in Los Angeles in recent years in which such a substantial number of defendants were exonerated.

“I felt from the beginning that the government over-indicted the case,” said Anna Ho, a Torrance lawyer who secured an acquittal for Krikor Chahinian, a Lebanese immigrant who was held without bail for 22 months while the case against him proceeded.

Assistant U.S. Atty. Jean Kawahara, one of the prosecutors, took issue with the contention that the government overreached. “We felt that at the time we brought the case for prosecution we had sufficient evidence to bring all the defendants to trial and the grand jury agreed.” Kawahara said she felt “very happy about the overall result” of the case.

Ho said that her client suffered unfairly during the drawn-out case.

Chahinian, 43, had been in the United States seven months, working as a $500-a-week messenger for Nazareth and Vahe Andonian, who owned a jewelry company at 220 W. 5th Street. The brothers were convicted on money-laundering charges. Chahinian was charged with picking up money from other jewelers for the Andonians and counting money that was delivered to the brothers.

“He was a mere messenger,” Ho said. “He had no guilty knowledge. He doesn’t speak English.”

Ho said Chahinian, a Tujunga resident, was still too traumatized by his experience to agree to an interview. “He is still having nightmares,” she said.

He faced 24 felony counts and a long prison term if convicted.

Three others were acquitted.

Sisters Zepur Moroyan, 22, and Joyce Momdjian, 25, both of La Crescenta, were acquitted of 26 felony counts. Moroyan said she planned to get married now that the seven-month trial has ended and Momdjian said she and her husband hoped to have a second child. When they were indicted, the women were working at Andonian Bros.; Moroyan as a $250-a-week receptionist and Momdjian as a $280-a-week bookkeeper.

Lawyers for the two women said that their clients were unaware of any illegal activity occurring at the business. They alleged that the women had been unjustly ensnared in the federal investigation.

“I think to a certain degree we’re all victims of our own technology,” said Paul Potter, Moroyan’s attorney. He contended that certain individuals who were culpable in the money-laundering scheme were not indicted because they operated overseas or on the East Coast and the government had been unable to use cameras or wiretaps against them.

Peniamin Mahseredjian, 37, the other acquitted defendant, said he is trying to put his life back together. He owns a small business, selling gold chains wholesale to jewelry retailers, in the same building where the Andonians operated.

Prosecutors alleged that he received 26 shipments of drug money, totaling $8.3 million in June, 1988, and turned the money over to his brothers-in-law, the Andonians.

When Mahseredjian was arrested, the government also seized $200,000 of his merchandise. He got it back after his acquittal and hopes to rebuild his business. Mahseredjian said he has substantial debts. He said he took out a $57,000 second mortgage on his La Crescenta home to help pay his legal bills, which exceed $110,000.

Despite his acquittal, Mahseredjian said he is concerned that he still has “a bad name” in the local Armenian community because he spent 17 days in jail before being bailed out in 1989.

“People say, ‘If nothing is wrong, why did you pay $110,000 for a lawyer?’ ” he said.